Self-Assessment of Tax on the Purchase of Carbon Emission Allowances

On June 27, 2018, changes were made to the rules for reporting and paying GST/HST and QST on taxable supplies of carbon emission allowances made in Québec or elsewhere in Canada on a secondary market, such as those traded in cap-and-trade systems.

The changes generally apply only to the secondary market of carbon pollution pricing instruments, where businesses can sell surplus emission allowances to companies that have exceeded their emission targets. The initial supply of emission allowances by a government entity generally remains exempt.

Under the new rules, purchasers of emission allowances must self-assess the GST and QST payable on the purchase and remit them to us. (Under the former rules, the seller of the allowance would collect the GST and QST from the purchaser and remit them.)

Registrants that are entitled to input tax credits (ITCs) and input tax refunds (ITRs) in respect of the taxes payable on the purchase of taxable emission allowances can claim them in their regular GST/HST and QST returns.

The changes do not affect the application of the GST or QST, but simply the manner in which they are collected and remitted to Revenu Québec.